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HSN, Inc. Reports Fourth Quarter And Full Year 2012 Results

Stocks in this article: HSNI

Conference Call

Mindy Grossman, Chief Executive Officer, and Judy Schmeling, Executive Vice President and Chief Financial Officer, will hold a conference call on February 21, 2013 at 9:00 a.m., Eastern Time, to discuss these results. Those interested in participating in the conference call should dial 877-307-0246 or 224-357-2394 at least five minutes prior to the call. There will also be a simultaneous audio webcast available via HSNi's website at http://www.hsni.com

A replay of the conference call can be accessed until March 7, 2013 by dialing 800-585-8367 or 404-537-3406, plus the pass code 86958240 and will also be hosted on the company's website for a limited time.

About HSN, Inc.

HSN, Inc. (Nasdaq:HSNI) is a $3 billion interactive multichannel retailer with strong direct-to-consumer expertise among its two operating segments, HSN and Cornerstone. HSNi offers innovative, differentiated retail experiences on TV, online, via mobile devices, in catalogs, and in brick and mortar stores. HSN, a leading interactive multichannel retailer which offers a curated assortment of exclusive products combined with top brand names, now reaches approximately 95 million homes (24 hours a day, seven days a week, live 364 days a year). HSN.com is a top 10 trafficked digital sales site that offers a differentiated digital experience by leveraging content, community and commerce. In addition to its existing media platforms, HSN is the industry leader in transactional innovation, including services such as HSN Shop by Remote ®, the only service of its kind in the U.S., the HSN Shopping App for mobile handheld devices and HSN on Demand ®. Cornerstone comprises leading home and apparel lifestyle brands including Ballard Designs ®, Chasing Fireflies ®, Frontgate ®, Garnet Hill ®, Grandin Road ®, Improvements ® and TravelSmith ®. Cornerstone distributes more than 300 million catalogs annually, operates eight separate digital sales sites and operates 11 retail and outlet stores.

The HSN, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8695

GAAP FINANCIAL STATEMENTS
 
HSN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands except per share amounts)
         
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
         
Net sales  $ 982,875  $ 921,968  $ 3,266,739  $ 3,069,356
Cost of sales  645,029  600,279  2,083,015  1,969,094
Gross profit  337,846  321,689  1,183,724  1,100,262
Operating expenses:        
Selling and marketing  180,971  173,045  662,322  616,416
General and administrative  54,287  53,045  224,653  208,982
Depreciation and amortization  9,756  9,371  38,005  35,822
Total operating expenses  245,014  235,461  924,980  861,220
Operating income  92,832  86,228  258,744  239,042
Other income (expense):        
Interest expense, net  (1,702)  (7,816)  (20,247)  (31,284)
Loss on debt extinguishment  --  --  (18,627)  --
Total other expense, net  (1,702)  (7,816)  (38,874)  (31,284)
Income from continuing operations before income taxes  91,130  78,412  219,870  207,758
Income tax provision  (35,089)  (30,245)  (83,373)  (80,106)
Income from continuing operations  56,041  48,167  136,497  127,652
Income (loss) from discontinued operations, net of tax  32  (1,649)  (5,822)  (4,582)
Net income  $ 56,073  $ 46,518  $ 130,675  $ 123,070
         
Income from continuing operations per share        
Basic  $ 1.03  $ 0.82  $ 2.42  $ 2.18
Diluted  $ 1.00  $ 0.79  $ 2.36  $ 2.10
         
Net income per share        
Basic  $ 1.03  $ 0.79  $ 2.32  $ 2.10
Diluted  $ 1.00  $ 0.76  $ 2.25  $ 2.03
         
Shares used in computing earnings per share        
Basic  54,528  58,818  56,314  58,636
Diluted  56,266  60,816  57,956  60,689
         
Dividends declared per common share  $ 0.18  $ --  $ 0.555  $ 0.125
 
 
HSN, INC. CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
  December 31,
  2012 2011
ASSETS    
Current assets:    
Cash and cash equivalents  $ 222,092  $ 381,808
Accounts receivable, net  249,890  222,583
Inventories  330,936  296,460
Deferred income taxes  27,603  24,302
Prepaid expenses and other current assets  46,172  44,966
Total current assets  876,693  970,119
Property and equipment, net  171,303  158,434
Intangible assets, net  266,876  258,048
Goodwill  9,858  -- 
Other non-current assets  7,222  8,372
TOTAL ASSETS  $ 1,331,952  $ 1,394,973
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Accounts payable, trade  $ 267,061  $ 270,227
Current maturities of long-term debt  9,375  -- 
Accrued expenses and other current liabilities  215,389  193,991
Total current liabilities  491,825  464,218
Long-term debt, net of current maturities  240,625  239,111
Deferred income taxes  79,002  78,131
Other long-term liabilities  15,986  23,816
Total liabilities  827,438  805,276
     
Total shareholders' equity  504,514  589,697
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $ 1,331,952  $ 1,394,973
 
 
HSN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
   
  Year Ended December 31,
  2012 2011
     
Cash flows from operating activities attributable to continuing operations:    
Net income  $ 130,675  $ 123,070
Loss from discontinued operations, net of tax  (5,822)  (4,582)
Income from continuing operations  136,497  127,652
Adjustments to reconcile income from continuing operations to net cash provided by operating activities attributable to continuing operations:    
Depreciation and amortization  38,005  35,822
Stock-based compensation expense  19,056  26,401
Loss on debt extinguishment  18,627 --
Amortization of debt issuance costs  1,777  2,941
Deferred income taxes  (2,146)  2,238
Bad debt expense 24,186 19,758
Excess tax benefits from stock-based awards  (19,004)  (9,835)
Other 764 2,343
Changes in current assets and liabilities:    
Accounts receivable  (51,995)  (46,201)
Inventories  (36,117)  (1,385)
Prepaid expenses and other assets  (3,724)  (3,213)
Accounts payable, accrued expenses and other liabilities  21,487  8,834
Net cash provided by operating activities attributable to continuing operations  147,413  165,355
Cash flows from investing activities attributable to continuing operations:    
Capital expenditures  (45,803)  (42,069)
Acquisition of business, net of cash received  (22,875)  --
Proceeds from sale of discontinued operations  6,580  --
Net cash used in investing activities attributable to continuing operations  (62,098)  (42,069)
Cash flows from financing activities attributable to continuing operations:    
Redemption of Senior Notes  (253,500)  (69,841)
Borrowing under term loan  250,000  --
Payments of debt issuance costs  (4,607)  --
Repurchase of common stock  (221,835)  (26,821)
Cash dividends paid  (31,049)  (7,384)
Proceeds from issuance of common stock  20,688  8,845
Tax withholdings related to stock-based awards  (18,209)  (11,430)
Excess tax benefits from stock-based awards  19,004  9,835
Net cash used in financing activities attributable to continuing operations  (239,508)  (96,796)
Total cash (used in) provided by continuing operations  (154,193)  26,490
Cash flows from discontinued operations:    
Net cash (used in) provided by operating activities attributable to discontinued operations  (5,361)  1,309
Net cash (used in) provided by investing activities attributable to discontinued operations  (162)  (250)
Total cash (used in) provided by discontinued operations  (5,523)  1,059
Net (decrease) increase in cash and cash equivalents  (159,716)  27,549
Cash and cash equivalents at beginning of period  381,808  354,259
Cash and cash equivalents at end of period  $ 222,092  $ 381,808
                 
                 
Table 4                
RECONCILIATIONS OF NON-GAAP TO GAAP MEASURES
HSN, INC. RECONCILIATION OF ADJUSTED NET INCOME AND ADJUSTED EPS TO GAAP NET INCOME AND GAAP DILUTED EPS
(unaudited; in thousands except per share amounts)
                 
  Three Months Ended December 31, Year Ended December 31,
  2012 2011 2012 2011
   Net Income   EPS   Net Income   EPS   Net Income   EPS   Net Income   EPS 
Non-GAAP Adjusted  $ 56,041  $ 1.00  $ 48,167  $ 0.79  $152,967  $ 2.64  $127,652  $ 2.10
Loss on debt extinguishment, net of tax  --  --   --  --   (11,631)  (0.20)  --  -- 
Sales tax settlement, net of tax  --  --   --  --   (4,839)  (0.08)  --  -- 
GAAP results from continuing operations  56,041  1.00  48,167  0.79  136,497  2.36  127,652  2.10
Loss from discontinued operations, net of tax  32  0.00  (1,649)  (0.03)  (5,822)  (0.10)  (4,582)  (0.08)
GAAP  $ 56,073  $ 1.00  $ 46,518  $ 0.76  $130,675  $ 2.25  $123,070  $ 2.03
GAAP diluted weighted average shares outstanding     56,266    60,816    57,956    60,689
 
 
HSN, INC. RECONCILIATION OF NON-GAAP DETAILED SEGMENT RESULTS TO GAAP
(unaudited; in thousands)
             
  Three Months Ended December 31, 2012 Three Months Ended December 31, 2011
   HSN  Cornerstone  Total   HSN  Cornerstone  Total 
             
Adjusted EBITDA  $ 84,015  $ 22,624  $ 106,639  $ 79,539  $ 23,406  $ 102,945
Stock-based compensation expense  (2,357)  (1,421)  (3,778)  (2,351)  (4,658)  (7,010)
Depreciation and amortization  (6,647)  (3,109)  (9,756)  (6,865)  (2,506)  (9,371)
Loss on disposition of fixed assets  (262)  (11)  (273)  (333)  (3)  (337)
Operating income  $ 74,749  $ 18,083  92,832  $ 69,990  $ 16,238  86,228
Total other expense, net      (1,702)      (7,816)
Income from continuing operations before income taxes      91,130      78,412
Income tax provision      (35,089)      (30,245)
Income from continuing operations      56,041      48,167
Income (loss) from discontinued operations, net of tax      32      (1,649)
Net income      $ 56,073      $ 46,518
             
  Year Ended December 31, 2012 Year Ended December 31, 2011
   HSN  Cornerstone  Total   HSN  Cornerstone  Total 
             
Adjusted EBITDA  $ 250,836  $ 73,441  $ 324,277  $ 235,163  $ 67,595  $ 302,758
Stock-based compensation expense  (11,167)  (7,889)  (19,056)  (13,101)  (13,300)  (26,401)
Depreciation and amortization  (26,486)  (11,519)  (38,005)  (27,652)  (8,170)  (35,822)
Sales tax settlement  --  (7,750)  (7,750)  --  --  --
Loss on disposition of fixed assets  (680)  (42)  (722)  (1,482)  (11)  (1,493)
Operating income  $ 212,503  $ 46,241  258,744  $ 192,928  $ 46,114  239,042
Total other expense, net      (38,874)      (31,284)
Income from continuing operations before income taxes      219,870      207,758
Income tax provision      (83,373)      (80,106)
Income from continuing operations      136,497      127,652
Loss from discontinued operations, net of tax      (5,822)      (4,582)
Net income      $ 130,675      $ 123,070

SEE IMPORTANT NOTES AT END OF THIS DOCUMENT

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